Norway unions delay offshore oil workers' strike escalation

By Rachael Fergusson

Published Tuesday, July 3, 2012

Norwegian trade unions have put off a decision to escalate an offshore oil and gas workers strike until Friday.

The strike, now in its 10th day, has cut daily Norwegian oil production by an estimated 13 per cent and gas output by around 4 per cent and has resulted in delays to crude shipments from the world's eighth-largest exporter.

Union leaders at a meeting on Tuesday decided against an escalation, aware that it could trigger a government intervention.

"The strike is at the right level for now," SAFE union leader Hilde Marit Rysst said, adding that workers were keen to avoid government intervention in the conflict. The next meeting is scheduled for July 6, she said.

"At this point we employ a delaying tactic where we want to inflict sufficient pain on oil firms to bring them back to the negotiating table," Rysst added.

Norway’s government has the power to force an end to a strike that it believes affects security or vital national interests. So far, government spokesmen have said the conflict should be resolved by the unions and the oil companies.

Brent crude futures topped $101 a barrel for the first time in three weeks on Tuesday mainly due to tension over Iran, which increased worries about supply, but the reduced shipments from Norway contributed to supporting prices.

"At this time there is nothing to indicate that the continuation of the strike will affect production more than it already has," said Leif Sande, leader of the Industri Energi union.

Operator Statoil has estimated the production cuts to be between 230,000 to 250,000 barrels of oil and natural gas liquids per day. About 4 per cent of Norway’s gas output has also been affected.

"The strike comes at a pivotal time for Europe, with sanctions on Iran just coming into effect and the economy struggling. In that perspective, 250,000 barrels is quite a lot," Nordea oil market analyst Thina Margrethe Saltvedt said.

"It's hard to predict how long the strike could go on for, but I'm sure they could keep it going for another week at the current levels. If the unions escalate, they risk government intervention, and they want to avoid that."

The Norwegian Oil Industry Association (OLF), representing Statoil and other operators, for its part could declare a lockout, threatening a complete production shutdown.

This would virtually guarantee government intervention but could also poison future relations with the unions.

Repeating a previous statement, OLF spokeswoman Eli Ane Nedreskaar said the industry "has the possibility" of a lockout and was discussing it. "I can't comment on the prospects of it," she said.

The unions said there had been some contact with employers but there was no basis yet for resuming full negotiations.

"We'd like a solution as soon as possible and would like to contribute to that, but we also need a signal from employers that they're willing to make concessions," Leif Sande of Industri Energi said.